Local conditions give reasons for optimism

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The news about housing starts - both locally and nationwide - isn't great. Markets around the U.S. are bracing for a slowdown, and Michigan is no different. But builders in Southeast Michigan have something that builders nationwide don't have: optimism.

The area builders have good reason for this, said Steve Atchison, Pulte Homes Michigan division president.

"There's a strong signal out there in new housing that prices have stabilized. I think the path of decreasing of prices and deep discounting is coming close to bottom than it has been before," Atchison said. "The first part of the year we've seen improvements from the fourth quarter of 2007, and business has picked up slightly. We've met our sales projections for the last month."

As national builders leave the Michigan market, they leave those still here in a better position. Pulte is reaping the benefits this year.

"You will see a possible decrease in housing starts," Atchison said. "But our business will probably see an increase in 2008. The rest of the market shrank more than we did." Pulte's Michigan market share in 2006 was 6 percent. In 2007 it was 8 percent, and Atchison believes that trend will continue.

When even one larger builder leaves the market, there are opportunities for those who stay. Pulte had in 2007 about 10 percent of the construction permits in Oakland County - 111 of the 1,018 total. The top 10 builders in the county pulled 40 percent of all the permits for the year last year, and had 31 percent of the permit values ($75 million of the total $239 billion), according to Clarkston-based Housing Consultants Inc.

"That's still a tremendous amount of building," said Richard Komer, first vice president of BIA of Southeastern Michigan. "That doesn't get as much attention as the gloom and doom of the foreclosures does."

Despite the attention the foreclosure rates have received in the news, and despite an apparent eagerness on the part of Realtors to sell foreclosed homes, Komer said the truth is that most people simply don't have the time to buy a foreclosed home, and there is a certain customer who will almost always prefer a newly built home.

Atchison said the new housing market is enjoying stabilization, even as foreclosure rates rise. He added that the recently approved federal economic stimulus package includes a provision for FHA loan limits to increase, as have conventional loan limits. FHA loans limits will go from the current $226,000 to upwards of $400,000, depending on the market, he said.

Still, the number of permits issued in all of 2007 should not give cause to most builders to be too optimistic. In the nine-county region of Southeast Michigan, there were only 4,943 housing starts last year, compared to the 24,359 in 2004, the year that marked the end of Michigan's housing building boom.

So, all this optimism doesn't mean local builders believe the market's rebound is right around the corner. And in fact, they're calling for at least one more challenging year this year.

Howard Fingeroot of Pinnacle Homes, which is growing right now because it buys deeply discounted property from developers and builders who are either over-extended or are facing foreclosure, said it's too early to tell exactly how this year will shake out. "People will look back at 2008 and say that's the year we should have bought," he said.